New Delhi: Reliance Industries Ltd (RIL) on Thursday announced that it is taking complete control of Network 18 Media and Investments Ltd, including its subsidiary TV18 Broadcast Ltd.

Founded by Raghav Bahl, Network18 is one of India’s largest media companies, which owns television channels CNBC TV18, CNN-IBN, CNBC Awaaz; websites Moneycontrol.com, firstpost.com; print magazines Forbes India, Overdrive; general entertainment channel Colors and Homeshop18, a television and Internet retail venture, among various other media and non-media businesses.

In a statement sent to the BSE, RIL said: “The Board of Reliance Industries Limited today approved funding of Rs.4,000 crore to Independent Media Trust (IMT), of which RIL is the sole beneficiary” for taking over Network18.

“IMT would use the funds to acquire control over NW18 and TVE18 resulting in ownership of about 78% in NW18 and 9% in TV18 and to acquire shares tendered in the open offers.”

As per Sebi’s (Securities and Exchange Board of India’s) Substantial Acquisition and Takeover Regulations 2011, “IMT would be making Open Offers to public shareholders for acquisition of equity shares in NW18, TV 18 and Infomedia Press Limited”.

The announcement was preceded by the exits of key executives and more are likely to follow. Several employees said they see the move as “hostile”.

Several people Mint spoke to confirmed that the company’s managing director Raghav Bahl and his wife and director Ritu Kapur have quit too. An official announcement on the exit of Bahl and his wife is yet to be made but “it is all over” said one senior Network18 executive who spoke on the condition of anonymity. “I can see her packing.”

According to people aware of the developments, things came to a head at a board meeting of Network18 held on 27 May. RIL’s decision to remove TV18’s old guard was communicated to Bahl and came as a shock to him and the rest of his team, said a person aware of happenings at the board meeting who asked not to be identified.

The members of the board of Network18 and subsidiary TV18 have stepped down, this person added. Mint couldn’t independently confirm this. There have been no filings to this effect to the stock exchanges.

“There will be a release out soon. Let’s just wait for it to come and then we can take it up from there,” she said. Chengalvarayan said that he had no idea what was happening in the company. “All I can say is that I am not quitting. I am running operations. I have this evening’s news list in my hand. I am just doing my job as a journalist.”

In a text message to Mint, Sardesai said, “Sorry, can’t say anything now. Will speak when I am ready or have something to say.” Ghose, who is Sardesai’s wife, declined to comment.

A second Network18 executive, who too spoke on condition of anonymity, said RIL already has the replacements in place.

Alok Agrawal, the former CEO at Zee News, is likely to head the new team at Network18, according to this person. Agarwal, who joined RIL earlier this month, could not be reached for a comment. Meanwhile, Avinash Kaul, former CEO at Times Television Network, has been appointed as the new head for IBN Network and will manage three news channels—CNN-IBN, IBN7 and IBN Lokmat.

For RIL, the takeover is a strategic move for its 4G telecom play in the country. In its statement, the company said, “The acquisition will differentiate Reliance’s 4G business by providing a unique amalgamation at the intersection of telecom, web and digital commerce via a suite of premier digital properties.”

To put it simply, RIL now has access to all the content put out by the Network18 group; this includes in.com, IBNlive.com, Moneycontrol.com, Firstpost.com, Cricketnext.in, Homeshop18, Bookmyshow.com and broadcast channels like Colors, CNBC TV18, CNN-IBN, IBN7 and CNBC Awaaz.

Then, it was only a matter of time before RIL took control of Network 18.

In late 2011, Bahl had his back to the wall. With a consolidated debt of almost Rs.1,400 crore on its books, in the quarter ended 30 September 2011, Network18 had widened its consolidated net loss to Rs.70.26 crore from Rs.64 crore in the previous quarter.

In the 12 months preceding that, the company’s scrip had slid almost 70%. The company’s cash cow, its news television business, was under pressure. Thanks to the prolonged economic downturn, advertising revenue had dried up.

Bahl’s bet on Web and general entertainment ventures, into which a lot of money had been invested, was taking time to pay off. Most of the businesses were in need of capital investment but Bahl didn’t have any money. Interest costs were already too high and with the company’s net worth almost eroded, banks weren’t willing to lend anymore.

Bahl was clear he needed help. From someone with deep pockets. From someone whom he could respect, and who, in turn, would respect him. The one man he reached out to was Mukesh Ambani. The richest man of India, who in the past has rescued several other entrepreneurs in need of help, was not averse to Bahl’s idea. Haresh Chawla, Network18’s CEO then, was. He reasoned with Bahl that a better idea would be to raise money by divesting a stake in the entertainment business to Viacom. Bahl wasn’t convinced because it was a depressed market and the valuation was low. Chawla persisted. And then quit.

In January 2012, RIL made an investment in Network18’s promoter group companies through a newly created vehicle called Independent Media Trust. The promoters, led by Bahl, used funds received from the trust to infuse cash into Network18 and its subsidiary TV18 Broadcast Ltd, apart from buying RIL’s stake in the ETV channels.

RIL’s investment was made in the form of zero coupon optionally convertible debentures in Network18’s promoter group companies controlled by Bahl. The debentures can be converted into shares at any time within a 10-year period since its issuance, and its conversion will result in an ownership of over 99.9% by RIL in these entities, according to an order by the Competition Commission of India.

Network18 and TV18 together raised a net Rs.4000 crore through rights issues in financial year 2012-13. Most of these funds came from RIL, since a large part of the issue was unsubscribed. The trust funded Bahl and related entities to buy their share of the rights issues, and additionally provided funds to buy rights shares that were unsubscribed by other investors.

As a result, promoter holding in Network18 rose from 48.3% to 73% after the rights issue. Besides, entities that are reportedly related to RIL/Mukesh Ambani such as Shinano Retail Pvt. Ltd and Nexg Ventures India Pvt. Ltd picked up a stake of about 10% in Network18 post the rights issue. According to Mint’s analysis, RIL has invested Rs.6,600 crore ($1.11 billion) for control over Network18 and Etv channels. In January 2012, it said it had made investments worth Rs.2,600 crore in ETV channels. The company owns a 50% stake in ETV’s Telegu channels and a 100% stake in all its other channels.

Since TV18, in turn, paid RIL Rs.2,100 crore for part of the Etv stake, the conglomerate’s effective investment works out to Rs.4,500 crore.

At the time, the person familiar with happenings during the 27 May board meeting said, it was envisaged that the “news properties” would be run by Bahl and his team with no interference from RIL, although the latter had the contractual right to take control of these.

RIL, too, said as much at the time in a press release. “Raghav Bahl and the current promoter entities of Network18 and TV18 will continue to retain control over Network18 and TV18,” the company said.

Network18’s financials have improved considerably since RIL invested indirectly in the company. In the year till March 2012, before the investment, the company reported operating losses worth Rs.270 crore on revenue of Rs.1,952 crore. In the year till March 2014, it turned profitable at the Ebitda (earnings before interest, tax, depreciation and amortization) level, with a profit of Rs.87.2 crore on consolidated revenues of Rs.2,692 crore.

Besides, in March 2012, Network18 had borrowings worth nearly Rs.2,400 crore. Operating cash flow was a negative Rs.249 crore and free cash flow stood at a negative Rs.335 crore, clearly showing the company’s desperate need for a cash infusion. Its net debt has now dropped to Rs.786 crore, thanks to which interest cost has come down from Rs.272 crore in FY12 to Rs.122.5 crore in FY14.

The person familiar with the happenings in the board meeting said Bahl and his team didn’t ever think RIL would oust them and seize control. Everyone wishes they could turn the clock back, he added.